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Exam 32: The Balance of Payments, Exchange Rates, and Trade Deficits

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Question 61

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In 2012,the U.S.public debt was about:

A) $16.4 trillion.
B) $6.8 trillion.
C) $5.3 trillion.
D) $11.9 trillion.

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Question 62

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The American Recovery and Reinvestment Act of 2009:

A) created a $700 billion rescue package for financial institutions.
B) cut taxes by $152 billion,distributed primarily as rebate checks to taxpayers.
C) implemented a $787 billion package of tax cuts and government expenditure increases.
D) substantially lowered interest rates in an attempt to stimulate investment spending.

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Question 63

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When the economy is at full employment:

Answer the question using the following budget information for a hypothetical economy.Assume that all budget surpluses are used to pay down the public debt. $\begin{array}{c}\begin{array}{lll}\\\\\text {Year 1}\\\text {Year 2}\\\text {Year 3}\\\text {Year 4}\\\text {Year 5}\\\text {Year 6}\end{array}\begin{array}{c}\text {Government}\\\underline{\text {Spending}}\\ \$ 450 \\500\\600\\640\\680\\600\end{array}\begin{array}{c}\\\underline{\text {Tax Revenues}}\\\$ 425 \\450 \\500 \\620 \\580 \\620\end{array}\begin{array}{c}\\\underline{\text { GDP }} \\ \$ 2,000 \\3,000 \\4,000 \\5,000 \\4,800 \\5,000\end{array}\end{array}$ Refer to the data.If year 1 is the first year of this nation's existence and year 4 is the present year,the public debt as a percentage of GDP in year 4 is:

It is more meaningful economically to measure the public debt relative to the GDP than to measure it in absolute terms.

The crowding-out effect of the public debt may be dampened if the investment-demand curve is shifting to the right.

Suppose the federal government had budget surpluses of $80 billion in year 1 and $120 billion in year 2 but had budget deficits of $10 billion in year 3 and $40 billion in year 4.Also assume that it used its budget surpluses to pay down the public debt.At the end of these four years,the federal government's public debt would have:

Recessions have contributed to the public debt by:

Answer the question using the following budget information for a hypothetical economy.Assume that all budget surpluses are used to pay down the public debt. $\begin{array}{c}\begin{array}{lll}\\\\\text {Year 1}\\\text {Year 2}\\\text {Year 3}\\\text {Year 4}\\\text {Year 5}\\\text {Year 6}\end{array}\begin{array}{c}\text {Government}\\\underline{\text {Spending}}\\ \$ 450 \\500\\600\\640\\680\\600\end{array}\begin{array}{c}\\\underline{\text {Tax Revenues}}\\\$ 425 \\450 \\500 \\620 \\580 \\620\end{array}\begin{array}{c}\\\underline{\text { GDP }} \\ \$ 2,000 \\3,000 \\4,000 \\5,000 \\4,800 \\5,000\end{array}\end{array}$ Refer to the data.The public debt declined in year:

The crowding-out effect is:

Discretionary fiscal policy refers to:

An effective expansionary fiscal policy will:

A contractionary fiscal policy shifts the aggregate demand curve leftward.

Answer the question on the basis of the following sequence of events involving fiscal policy: (1) The composite index of leading indicators turns downward for three consecutive months,suggesting the possibility of a recession. (2) Economists reach agreement that the economy is moving into a recession. (3) A tax cut is proposed in Congress. (4) The tax cut is passed by Congress and signed by the president. (5) Consumption spending begins to rise,aggregate demand increases,and the economy begins to recover. Refer to the information.The recognition lag of fiscal policy is reflected in events:

Expansionary fiscal policy is so named because it involves an expansion of the nation's money supply.

In a certain year the aggregate amount demanded at the existing price level consists of $100 billion of consumption,$40 billion of investment,$10 billion of net exports,and $20 billion of government purchases.Full-employment GDP is $200 billion.To obtain full employment under these conditions,the government should:

Answer the question on the basis of the following sequence of events involving fiscal policy: (1) The composite index of leading indicators turns downward for three consecutive months,suggesting the possibility of a recession. (2) Economists reach agreement that the economy is moving into a recession. (3) A tax cut is proposed in Congress. (4) The tax cut is passed by Congress and signed by the president. (5) Consumption spending begins to rise,aggregate demand increases,and the economy begins to recover. Refer to the information.The administrative lag of fiscal policy is reflected in events:

An expansionary fiscal policy is shown as a:

Answer the question using the following budget information for a hypothetical economy.Assume that all budget surpluses are used to pay down the public debt. $\begin{array}{c}\begin{array}{lll}\\\\\text {Year 1}\\\text {Year 2}\\\text {Year 3}\\\text {Year 4}\\\text {Year 5}\\\text {Year 6}\end{array}\begin{array}{c}\text {Government}\\\underline{\text {Spending}}\\ \$ 450 \\500\\600\\640\\680\\600\end{array}\begin{array}{c}\\\underline{\text {Tax Revenues}}\\\$ 425 \\450 \\500 \\620 \\580 \\620\end{array}\begin{array}{c}\\\underline{\text { GDP }} \\ \$ 2,000 \\3,000 \\4,000 \\5,000 \\4,800 \\5,000\end{array}\end{array}$ Refer to the data.The budget deficit in year 3 is:

Which of the following statements is correct?